Posted on March 18, 2025

As a Realtor who regularly works with military homebuyers, I often get questions about VA loan funding fees. While VA loans offer exceptional benefits like zero down payments and no private mortgage insurance (PMI), it's important to understand the VA funding fee—an essential component designed to sustain the VA loan program.

1. What Is the VA Funding Fee
The VA funding fee is a one-time charge required by the Department of Veterans Affairs for most VA-backed home loans. This fee helps sustain the program, allowing veterans and active service members to enjoy favorable loan terms, such as no required down payment or private mortgage insurance (PMI). You can either pay the funding fee upfront at closing or roll it into your loan, which increases your overall loan amount but reduces upfront expenses.

2. How Much Is the VA Funding Fee?
The VA funding fee depends on several factors:

• First-Time vs. Subsequent Use: First-time VA loan borrowers pay a lower funding fee compared to those using the VA benefit again.
• First-time use with no down payment: 2.15%
• Subsequent use with no down payment: 3.3%
  

Down payments also impact the funding fee:

• Down payment of 5% or more: 1.5%
• Down payment of 10% or more: 1.25%
  

Loan type matters as well. For example:

• Cash-out refinance: Typically 2.15% to 3.3%
• Interest Rate Reduction Refinance Loan (IRRRL): Fixed at 0.5%
  

The fee can either be paid upfront or financed into the loan, though financing it will slightly increase your loan balance and monthly payment.

3. Who Is Exempt from the VA Funding Fee?
Certain borrowers qualify for exemption from the funding fee, including:

• Veterans receiving VA compensation for service-connected disabilities
• Surviving spouses of veterans who died during service or from service-related disabilities
• Active-duty service members who have received the Purple Heart
• Veterans eligible for disability compensation, even if they're currently receiving retirement or active-duty pay instead
  

Coordinate closely with your lender to confirm exemption eligibility and provide necessary documentation.

Pro Tip: If you're concerned about the funding fee's upfront costs and don't qualify for an exemption, financing it into your loan can help minimize out-of-pocket expenses at closing.

4. Maximizing Your VA Loan Benefits To fully utilize the benefits of your VA loan:

• Leverage your full entitlement to eliminate VA-imposed loan limits and purchase higher-priced properties if financially qualified.
• Budget for the funding fee as part of your overall home-buying expenses.
• Work closely with a knowledgeable Realtor experienced with VA loans to help navigate property selections, negotiations, and closing processes effectively.
  

Conclusion: Understanding the VA funding fee and your options for managing it is essential to maximizing your VA home loan benefits. Whether you're buying your first home or using your VA benefit again, awareness of fees, exemptions, and financing strategies ensures you’re making the most informed decisions possible.

If you have further questions about VA loans, funding fees, or navigating the home-buying process, don't hesitate to contact me—I'm here to guide you every step of the way!